A bipartisan deal reached by Angus King and seven of his fellow U.S. Senators would lower interest rates for all students who borrow money from the federal government. The agreement on student loans is retroactive to July 1st, when Congress failed to act and allowed interest rates on new loans to double. Under the Fixing Student Loans for Everyone Act, all newly-issued, federal student loans would be set to the U.S. Treasury 10-year borrowing rate.

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Senate Lowers Student Loan Rates

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On Tuesday afternoon, with the final parameters of a compromise taking shape, King and his colleagues had one final meeting.

"About 5:30, half dozen of us went to the White House and met with the President and the Vice President," King said.

Some White House meetings with the President are photo ops, more stagecraft than substance. Not this one, said King.

"He got it," he said. "He understood the issue. And he basically said I think what you guys have come up with is good and I'm going to support it."

The compromise has one major thing in common with both the plan proposed in President Obama's budget and an earlier bill passed by the U.S. House of Representatives. It ties interest rates for student loans to the 10-year Treasury note. Interests rates for the nine million undergraduates, taking loans out this summer, will drop from 6.8 to 3.86%.

"This is really the best of all worlds for the students," he said. "They get the benefit of low interest rates, when interest rates are low. And they're protected on the upside, when interest rates get too high."

That's because the bill includes caps. Interest rates for undergraduates, for example, would never be allowed to go above 8.25%. And rates would be capped at 9.5% for graduate students and 10.5% for so-called Plus Borrowers. But not everyone is applauding the terms.

"We think this deal is a missed opportunity to make college more affordable for students and families," said Lauren Asher, head of the Institute for College Access and Success.

In 1993, according to Asher, less than half of four-year college graduates had students loans. Now, it's two-thirds. According to the Institute's Project on Student Debt, the average student in the U.S. has $26,600 in loans to pay off. Asher said the Senate compromise will make it harder for students to pay down what they owe.

"This deal, over the next ten years, will cost borrowers $715-million more than if current rates were just left in place," said Asher.

At the University of Maine, where financial aid officials process $55-million a year in student loans, officials aren't entirely happy with the deal either. Gianna Marrs runs the Financial Aid office in Orono.

"I think, in the short term, it's good news," Marrs said. "Whether it's good news once interest rates rise, we might look back at 6.8 as being a really great interest rate."

The full Senate is expected to vote on the deal by next week in hopes of getting the bill to the President's desk before the August recess.